Sunday, 3 October 2010

Cuts ot universal benefits in UK?

Must say, loved hearing Ian Duncan Smith of the Radio today sticking to some BBC numpties over changing the benefits system. The BBC interviewer kept saying, '"hmmm" after every question and then proceeding to read out the most vitriolic emails she could find - i.e. are you going to stop disabled people having any benefits etc.

Even better was when a caller phoned in to ask whether it was expected that everyone should get a job rather than cut benefits.

Bill Quango is convinced this policy will be the downfall of the Government because it will always look like an attack on the poor, right or wrong.

I have more faith that the people who actually vote and pay taxes will stand strong and realise we do need a culture change.

Overall, this is the most radical thing the new Government is doing and it deserves to succeed for having the vision to seek change in such a broken, but controversial area.

14 comments:

The problem will be that there aren't going to be any jobs for a lot of these people to do. That IS going to look (and be) bad.

Housing benefit's the killer. Here's Fred, wife, 2 kids, been on benefits for years, sees the light and gets a £6.50 ph job - about 10K - before tax. But his Housing Benefit was £500 a month for his 3-bedroomed housing association semi - that's 6K post-tax. His council tax was paid - that's another 1.2K post-tax. How's this going to work ? The guy and his family would be close to starving if they had to pay for their own accommodation.

Labour could perhaps have done something in 1998 when there were plenty of jobs - instead they sacked Frank Field and put their heads in the sand (they also killed our nuclear industry). My contempt for that decision knows no bounds.

Labor started to do something about it. It was called a tax credit.It was a good idea in principle, but very badly done.One problem came when your income level rose - you got a bill for the overpayment of tax credit about a year later.

This is one reason why the HMRC want(ed?) to act as central paying agents - your employer pays HMRC, HMRC pays you. Doing that simplifies the process of providing and calculating taxes and benefits.

Some might say this makes a lot of sense.

Others might think that it a point of principle that what you earn is your money, some of which you 'let' the HMRC take, rather than what you earn belongs to the government and they give some of it back to you.

Me, I would like govt to stand up and state that they will make sure people who go back to work will be no worse off as a result of working. It may well turn out to be cost-neutral.

It would be much better to have a single universal benefit funded by solely taxing Government created monopolies such as land and patents, and then returning this less the cost of the government equally to the people.

Bill could be right, but then again it might be the popping of the housing bubble with further massive bank losses that brings down the government. I suppose though that the totally unfunded state pension system might turn older voters against the government, or it could be a surge in import prices as the pound falls.The government are a bug in search of a windscreen. We don't know when they are going to hit it, but they are going to it it.

Most of the problem is down to stupidity in implementation; the people who cannot afford to live together because of housing benefit for example. Some Carswell-type direct democracy and user input is what is needed (of course). I suspect that there is no technocratic solution that will work.

a) pay that person's rent for year 1 - no it wouldn't 'cos of the 1-year lagb) pay that rent after 1 year (I don't think the levels are high enough, are they ?)

HMRC could start by not taxing anyone at or below say a 40-hr minimum wage week. They also need to do something about transferable allowances, so that people who aren't on benefits can afford children. You could only allow transferable allowances for those with kids.

As for cutting child benefit for over 16s, the Government considers our children to be dependents up to the age of 25 when student grants are being calculated !

IDS is stumbling vaguely towards a Citizen\s Income type scheme, only he calls it Universal Credits/Single Unified Taper.

This is a splendid idea, of course, we just have to agree what the UC is and how savage the SUT is. And it would be nice if the meshed with the personal allowance for income tax, i.e. your benefits are tapered down to £nil at exactly the earnings level where you reach the personal allowance.

None of this is mathematically or administratively difficult to implement, and can easily made fiscally neutral etc.

Housing Benefit is red herring, scrap it entirely and build more social housing, job done.

Laban said: "They also need to do something about transferable allowances, so that people who aren't on benefits can afford children."

Yes, I very much agree. I have advocated scrapping child benefit and tax credits, in order to give everyone, as soon as they are born, a personal allowance. This would be transferable from the child to the parent.

So for example two working adults with a child could earn £21k without tax (if there is a £7k personal allowance). This would be vastly simpler than the current creaking system.

Using what for capital? And even when built social housing costs in admin and repairs. Housing benefit is one of the more sane props to the poor, and cannot be whisked away on a mere personal whim like that.

Housing benefit is a an OK benefit in my book - the point is to stop the budget from ballooning by having a rubbish system. The idea of limiting it is great, it stops people living in clover at taxpayers expense whilst keeping rooves over peoples heads.

I am slightly surprised that at the same time as this attack on the middle classes George didn't put down a marker on the limiting of universal child benefit. From 2011, Child benefit will be increased but restricted to the first two children with a marginal extra payment on the third and over.

But that means most low-paids no-savings who take 3+ months to find a new job (say 6 months), and cannot borrow for the rent, would need to move home. The social disruption (kids moving school etc) would be large, probably causing extra long term social costs.

Also you'd need a stock of empty social housing waiting for the next recession, when demand for them would be much higher.